Environmental Taxation and FIRS: Aligning with Sustainable Business Practices.

Improving the environment in the EU: taxation does not work, property  rights do. - IREF Europe EN


The world is increasingly recognizing the urgent need for environmental sustainability. In Nigeria, as in many other countries, the government is taking steps to encourage sustainable practices within the business sector. One way this is being accomplished is through environmental taxation. The Federal Inland Revenue Service (FIRS) is at the forefront of aligning tax policies with sustainable business practices in Nigeria. In this article, we will explore the concept of environmental taxation and how FIRS is driving its adoption to promote sustainability.

Environmental Taxation: What is it?

Environmental taxation, often referred to as eco-taxation or green taxation, is a policy tool used by governments to influence business behavior towards more environmentally friendly practices. It operates by imposing taxes or levies on activities that have a detrimental impact on the environment while offering incentives or tax breaks to those engaging in eco-friendly practices.

FIRS and Environmental Taxation:

  1. Carbon Emission Tax: FIRS has introduced a carbon emission tax that applies to industries and businesses that emit greenhouse gases. This tax encourages businesses to reduce their carbon footprint by investing in cleaner technologies and practices.
  2. Waste Management Levy: To address the issue of improper waste disposal and encourage responsible waste management, FIRS has implemented waste management levies on businesses. Companies that effectively manage their waste and engage in recycling can benefit from reduced levies.
  3. Renewable Energy Incentives: FIRS offers tax incentives to businesses that invest in renewable energy sources, such as solar or wind power. These incentives include tax credits and deductions to promote the use of clean energy.
  4. Water Usage Taxes: Water is a finite and essential resource. FIRS has introduced taxes on excessive water usage by businesses, encouraging them to implement water-saving technologies and practices.
  5. Green Building Tax Incentives: FIRS provides tax incentives to businesses that construct eco-friendly and energy-efficient buildings. These incentives promote sustainable architecture and construction practices.

Benefits of Environmental Taxation:

  1. Promoting Sustainability: Environmental taxes encourage businesses to adopt sustainable practices, reducing their negative impact on the environment.
  2. Revenue Generation: Revenue generated from environmental taxes can be reinvested in environmental protection and conservation efforts.
  3. Fostering Innovation: Environmental taxation incentivizes businesses to innovate and develop cleaner technologies and processes.
  4. Global Compliance: Aligning with international environmental standards and practices through taxation ensures Nigeria’s competitiveness in the global market.

Challenges and Considerations:

  1. Awareness and Education: Many businesses may not be fully aware of the environmental tax policies and their implications. FIRS should engage in awareness campaigns to educate businesses about these policies.
  2. Monitoring and Enforcement: Effective enforcement of environmental tax policies can be challenging. FIRS should invest in monitoring mechanisms to ensure compliance.
  3. Balancing Economic Growth: Striking a balance between environmental sustainability and economic growth is crucial. Tax policies should encourage sustainability without stifling economic development.


Environmental taxation is a powerful tool for aligning business practices with sustainability goals. FIRS’ initiatives in this area demonstrate a commitment to promoting eco-friendly practices within the Nigerian business landscape. Businesses should proactively explore these environmental tax incentives, not only to reduce their tax burden but also to contribute to a more sustainable future for Nigeria. As environmental concerns continue to grow globally, aligning with eco-friendly practices through taxation is not just a regulatory requirement; it is a strategic imperative for businesses seeking long-term success in Nigeria’s evolving economic landscape.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.